Show the composition of typicals income tax expense

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Reference no: EM13848716

Typical Corp. reported a deferred tax liability of 56,000,000 for the year ended December 31, 2010, when the tax rate was 40%. The deferred tax liability was related to a temporary difference of $15,000,000 caused by an installment sale in 2010. The temporary difference is expected to reverse in 2012 when the income deferred from taxation will become taxable. There are no other temporary differences. Assume a new tax law passed in 2011 and the tax rate, which will remain at 40% for through December 31, 2011, will become 48% for tax years beginning after December 31, 2011. Taxable income for the year 2011 is $30,000,000.

Required: Prepare two footnotes for Typical's year 2011 financial statements to:

(a) Show the composition of Typical's income tax expense for the year.

(b) Explain the classification and description of the deferred tax liability.

Give supporting computations to show how you arrived at the dollar amounts disclosed in your footnotes.

Reference no: EM13848716

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